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Impressions from Bitcoin Conference, London 2012

Bitcoin conference was an amazing experience for DIGMIA and myself. I wanted to share some thoughts of why I think this event was important and what I learned.

A little bit of background: as you may already now, Bitcoin is next development in currencies and a special case of currency called crypto-currency. It is a first working implementation of this old idea. If you want to know about Bitcoin, see http://www.weusecoins.com/ or our Progressbar presentations and sessions in both English and Slovak here: https://www.progressbar.sk/bitcoin.

Now for those who already know what Bitcoin is about, I wanted to share highlights from the conference. The opening speech by Amir Taaki (organizer of the conference) tried to put Bitcoin into larger context. He was very successful in that. He was followed by lightning talks (short talks by anyone who wanted to say something). Most interesting were a talk by Anthony Gallippi, CEO of BitPay. His company is a payment processor for Bitcoins, much like credit-card processors. It allows you to take Bitcoin payments and their system converts them to your local currency and pays you once a day to your normal bank account. It also takes away risk of Bitcoin fluctuations, so if your shop requests $10 USD, they receive $10 USD minus BitPay fees (which are generally much lower than credit card payments). For this reason, accepting Bitcoins is really a no-brainer. They announced that they signed up their 1000th customer. We wish them luck and hope they will support businesses also in Slovakia (although larger European countries and euros are already supported).

Other lightning talk was by someone from ButterFly Labs that is trying to manufacture first ASIC-based Bitcoin miners. They actually did not answer any relevant technological questions, but it was nice seeing someone real behind the company. There were a lot of questions about legitimity of ButterFly Labs and working prototype has yet to be seen. The community has so far focused on mining per se and I think mining itself is not that interesting. If you are a fan of gold (more on that later), you probably know nothing about prices of gold mining equipment, locations of mines, etc. Of course unless you really want to mine yourself or invest into a mining company. The fact is that this is not always profitable, as the cost of mining can be higher than the value of gold found (depends on the location of course). This is the same case with Bitcoins. I recommend not focusing on mining, but on trade and applications.

While I have not seen Caleb James DeLisle's talk about his project CJDNS (nothing to do with DNS - it's a distributed routing protocol), I have played with CJDNS and talked to him during the hackathon. His work is very important: building a really dynamic routing protocol with end-to-end encryption. The technology is currently being simulated on current Internet, but the idea is to create a mesh network using peer to peer interconnects (wireless, fiber, ethernet, …). The network should be censorship resistant in a way: If there's a way around a broken link, it will find a way to get there. And it's end-to-end encrypted. Caleb has a very interesting approach to programming and a true geek.

I also missed a talk by Mihai Alisie about Bitcoin magazine, but had a chance to chat with him during many social events. He and Vladimir are both doing a great job and I started to read the paper Bitcoin magazine. I was a subscriber from the start, but I did not have a chance to actually read the magazine. The essays and quality of the magazine is surprisingly good and you can see that the Bitcoin economy is thriving. I wish I could say that about European economy as well.

Birgitta Jonsdottir is famous for being one of the few geeky persons in any parliament - in this case Icelandic. She is a hacker and an artist. And she decided to fight for our freedom. For example as a producer of "collateral murder" video and author of first Icelandic audio broadcast. She was speaking about freedom and how geeks should affect the lawmaking process, currently dominated by lobbyists. I recommend you follow her on Twitter and listen to her, she has a lot to say.

Lasse Birk Olsen had a great presentation about Seasteading Institute. It's an effort to build nations on marine platforms in international waters and experiment with creating new governments, states or social entities. There is little innovation in government. The best ones steal a lot of money from their customers, the worst ones even kill their customers. There is room for innovation, but the barriers to entry are pretty high. There's a lot of vendor lock-in (it's quite difficult to move). Seasteading is an attempt to explore various options to allow migration (hook your platform to a boat a move to another country - with your house and neighbours if needed) and experimentation in government (lowering barrier to entry).

Stan Stalnaker explained their alternative currency - Ven. Their approach is to seek regulatory approval, 100% backing by a basket of commodities and centralization. His presentation was surprisingly open about differences between Ven and Bitcoin and he argued that both currencies could grow together, using strengths of the other currency as a catalyst. I have applied for Hub Culture membership to use Ven. Stan also offered community a range of analytic tools for various commodity and currency markets. I am not sure how to access those though.

Peter Surda described his work on economic background of Bitcoin. How would major deflation affect business. Could major company buy in Bitcoins, sell later (when prices are lower) and still make a profit? (Answer: according to his simulations, yes). Peter is writing a book about Bitcoin and we spent a lot of time talking about economy. I am really glad I have met him in person after knowing him "online" for years. I am definitely looking forward to reading his book.

We did not attend Saturday's party, but according to reliable source (Amir), it was amazing. On Sunday, the presentations were more about Bitcoin than about context around it, which I liked. It was also a day I had my session, so I did not attend Stefan Thomas's "Bitcoin and Browsers: Tales of a difficult marriage". Stefan is an author of Bitcoin-JS, which is used by many Bitcoin wallets. It allows you to work with Bitcoin keys, addresses and transactions in the browser. Stefan also created a NodeJS reimplementation of Bitcoin protocol (Bitcoin client). This work is very important, in addition to Java reimplementation and Electrum client, these clients and libraries provide alternative to "official" Bitcoin client. Should a bug in official client (as opposed to protocol) be found, variety in client implementations provide the option to stay safe and lower the bug's impact. This work is very, very important.

Jeff Garzik's presentation "State of the coin" showed us developments in Bitcoin. He mentioned brain-wallets (wallets that consist of Bitcoin private keys created from memorable long "seed" - to spend your coins, you just need to remember the phrase, you don't need any other files stored anywhere). I also liked his security best practices for merchants. They are obvious, but recent hacks of merchants show that they are not implemented widely enough.

Marek Palatinus developed a new protocol for pooled mining. Marek is an author of pooled mining and operator of first-ever Bitcoin pool at mining.bitcoin.cz. He has a lot of experience and takes his work very seriously. There are some problems with protocols, when new block is mined, there's a surge in traffic. Polling and long polling are not enough and Marek's protocol has much better performance than other mining protocols. This means more revenue for the miners (less refused blocks, faster change of target) and less trouble for mining pool operators.

Pavol Luptak presented how to build free markets and other anonymous services. His approach leveraged Tor hidden service protected by a remote reverse proxy server (paid for by Bitcoins). This means you can operate normal web site in clearnet, but still staying completely anonymous.

My presentation was next, I tried to explain why economic freedom is important (see slides) and how you can use Bitcoin to work around (and not break) some of those regulations. I also argued, that start-ups should start early by accepting payments in Bitcoin. This would allow them to test their product with real customers, yet not fighting scalability issues at first. It is very difficult to receive money over internet - it's expensive, if you are doing something not very common, it is difficult and approval process for accepting credit cards is bureaucratic and difficult. If you start with Bitcoin, you can add "normal" payment methods later, as you grow. Bitcoin has cca 1 million real users over the world and they are happy to test new enterprises and ideas.

Frank Braun argued that Bitcoin should not seek regulatory approval and support of large banks. He said that Bitcoin is clearly against their interest and they will never support it. We should build markets and over the counter exchanges. Isn't one of the easiest ways to prevent failure simply becoming Too Big To Fail?

Jeremias Kangas is an author of several interesting Bitcoin-related projects, most notably django-bitcoin, acceptbit.com and localbitcoins.com. He explained some best-practices and experience with building them. He also has a nice "lean" approach to building businesses and was very honest and direct about risks of such ventures. He is nice enough to release most of his software as free and open source.

Charles Vollum's presentation was really about changing our minds. He is a really good speaker. He uses gold as a measure of value - it is arguably much more stable and value of goods priced in gold does not vary too much over longer time periods. It is very easy to understand this, especially as governments try to apply Keynesian doctrine and try to inflate themselves out of their debts and inflate economy into growing. What they really causing is huge economical misallocations and theft of private property from their own citizens. A simple hedge against this problem is using gold as cash and using dollars or euros or other fiat currencies only as a very temporary medium of exchange. Sir Charles created website called pricedingold.com and also an iOS application. He writes a blog and commentary about the prices. For example, he showed that prices of U.S. stock started to fall rapidly during the financial crisis and their dollar value kept growing, almost going back to pre-crises numbers. People were happy that their loss was covered. If you see the price in gold, it did not start to rise and is still falling, albeit slowly. The reason is that the unit of measure (dollars) is losing it's value, while gold keeps it. If you want to rule away these inflationary influences in your economic thinking, use gold as a measure of value.

Andrew Miller's presentation about Bitcoin's theoretical foundations explored other possibilities how to get to "distributed consensus" that's at the core of distributed transaction history required for Bitcoin to work.

I really liked this year's Bitcoin conference in London and I am proud I was involved - as a visitor, sponsor (DIGMIA) and a speaker. I would like to thank organisers, speakers and attendees. I clearly realized that Bitcoin community grew and got much more acceptance. We are no longer fighting with everyone, explaining how it could work. We are making it happen, creating services and new markets. I am happy that I can be part of it.